Evolus Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 2, 2023

There are 14 speakers on the call.

Operator

And welcome to Evolus Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.

Operator

David Erickson, Vice President of Investor Relations.

Speaker 1

Thank you, operator, and welcome to everyone joining us on today's call. With me today are David Motosetti, President Chief Executive Officer Rui Avelar, Chief Medical Officer and Head of R and D and Sandra Bieber, Chief Financial Officer. Our prepared remarks today will include forward looking statements within the meaning of United States securities laws and management may make additional forward looking statements in response to your questions. Forward looking statements are based on management's current assumptions and expectations of future events and trends, which may affect the company's business, Strategy, operations or financial performance. A detailed discussion of the risks and uncertainties that the company faces is contained in its annual report on Form 10 ks, quarterly reports on Form 10 Q and current reports on Form 8 ks.

Speaker 1

Actual results may differ materially from those expressed in or implied by the forward looking statements. The company undertakes no obligation to update or review any Objection or forward looking statement. Additionally, today's discussion will include non GAAP financial measures, which should be considered in addition to and not as a substitute for or in isolation from our GAAP results. A reconciliation of GAAP to non GAAP results may be found in our earnings release, which was furnished with our Form 8 ks filed today with the SEC and on our Investor Relations website at evolus.com. Following the conclusion of today's call, a replay will be available on our website at evolus.com.

Speaker 1

And with that, I'll turn the call over to David.

Speaker 2

Thank you, David. We're pleased to report another quarter of continued above market sales growth that reflected record sales and accelerating growth over the Q1. In the Q2, we achieved all time highs across several leading indicators, including expansion of new accounts And increased consumer usage of Jeuveau through our Evolus Rewards consumer loyalty program. On top of an above market Q1, 2nd quarter growth accelerated by 10 points, resulting in an increase of 1 full share point for Jeuveau in the front half of the year, exceeding our internal goal by already achieving our full year share target. The combination of continued strength and execution And increasing momentum gives us the confidence to raise our 2023 sales guidance to between $185,000,000 $195,000,000 This updated guidance equates to over 30% growth at the upper end of our range and is more than triple the estimated category growth rate.

Speaker 2

While we continue to concentrate on strong execution, we remain focused on our 20 28 sales goal of 700,000,000 Driven by the continued expansion of Jeuveau in the U. S, the international expansion of Nuceva and the introduction of Evolise. Moving to AVALYSE. We are rapidly advancing the clinical programs to support the regulatory approval for the first two AVALYSE filler products in 2025. We expect to complete our FDA filing in approximately 12 months.

Speaker 2

Additionally, we recently completed our Phase 2 extra Thanks, Stadee, Perjival and look forward to the presentation of those results in the Q4. From an operating standpoint, We continue to exercise disciplined operating expense management and remain committed to reaching sustained profitability. Our operating leverage is evidenced by our 28% increase in top line in the front half of the year, which was nearly double the rate of non GAAP operating Expense growth. This is a continued trend of increasing operating leverage. Overall, Evolus is delivering on our goals for growth and operating performance as we advance our mission to become a global multi product aesthetics company.

Speaker 2

Now I'll get into some of the details. 2nd quarter sales grew 33% year over year as broader adoption of Jeuveau Continued to drive market share gains. Our above market performance is evidence of both our accelerating momentum and a resilient U. S. Toxin market.

Speaker 2

Our key performance indicators continue to reflect increased market penetration. During the Q2, we added nearly 800 new accounts, bringing our total customer count to approximately 11,000. This record number of new accounts validates the compelling value that our unique business model offers to both new customers and existing clients who are purchasing greater quantities of Jeuveau, enabling access to additional loyalty program benefits. These benefits include co branded media opportunities targeted to the younger generation, such as streaming TV ads, billboards and digital advertising. We expect to continue adding new customers At a robust pace in 2023 and beyond as we penetrate more deeply into the total U.

Speaker 2

S. Market of 30,000 accounts. Of note, Jeuveau has only penetrated about 1 third of the account based currently offering neurotoxins. The durability of Jeuveau can be measured by consumer activity through our consumer loyalty program. There are 2 key metrics we view as predictive of future growth.

Speaker 2

The first is new members who enrolled in our program and the second is the total number of consumers, which includes a combination of new and existing members. In this quarter, we added 64,000 new members to our Evolus Rewards consumer loyalty program, bringing our total Jeuveau user base in the program to 638,000. Enrollment in our text based Evolus Rewards program is simple for members. Once enrolled, members receive $40 off each Jeuveau treatment. This drives these members back into the practice more frequently, allowing our customers to cross sell additional treatment.

Speaker 2

Importantly, the majority of new to toxin members in our rewards program are millennials or younger, which is a highly desirable demographic that will represent the majority of users in the category over the next several years. Total Jeuveau treatments in our loyalty program exceeded 147,000, an all time quarterly high, As existing members continue to return for repeat treatments of Jeuveau, demonstrating sustained brand loyalty. During the quarter, we reached an important milestone by completing the 1 millionth treatment in this program since launching it 3 years ago. Turning to our international operations. We are now commercial with Nucyba in 5 major countries.

Speaker 2

We are continuing to build momentum in Great Britain, Germany and Austria and are excited to have recently initiated the launch of Naseva in Italy, the 4th largest aesthetic neurotoxin market in the $500,000,000 European region. Europe remains an important part of our overall growth strategy, representing an estimated high single digit 1,000,000 in sales in 2023. Longer term, We continue to expect total international sales to represent 10% to 15% of our 20 28 revenue target of $700,000,000 Now I'll turn it over to Rui for product development update.

Speaker 3

Thank you, David. I'd like to provide you with an update

Speaker 2

on our 5 new fillers currently

Speaker 3

in late stages of development. The Evolise product line covers a broad spectrum of indications, including Mid face volume restoration, nasolabial folds, lip volume and an eye product to address the hollows under the eyes that can lead to those dark This is a next generation filler line, one that utilizes cool technology. As mentioned on the last call, Our partner, Cimatase, developed a 1st in class manufacturing process that helps to preserve natural complex of the hyaluronic acid molecule. This is key to creating a gel that is dynamic to ensure it moves naturally with tissue and able to withstand repeated shear and stress to last over time. The first two products Smooth and Lift Are currently undergoing clinical investigations.

Speaker 3

140 patients were enrolled at 6 clinical sites. The study is 1 year long and uses Restylane L as the active control. It's a non inferiority design And looks at the change from the baseline using a validated nasolabial fold scale compared to Restylane L at 6 months after treatment. The 1 year follow-up ends in Q4 this year, then patients will receive a repeat treatment. We continue to be on track for approval of these two products in 2025.

Speaker 3

The study for the 3rd product, a mid face Cheek volumizing filler, Sculpt, is a longer trial. 308 patients were enrolled at 11 sites. This study is 2 years in duration and uses Restylane Lyft as the active control. This is also a nonferiority design with the primary endpoint at 6 months comparing EVOLISSE to the active control. We expect the last patient to complete the study in 2025, leading to an approval in 2026.

Speaker 3

Regarding the lip filler, we plan to submit the IDE in Q4 of this year, followed by the eye product in Q1 of 2024 and expect to have the approval for both products in 2027. We'll provide further details about these trials in the near future. The 2 initial products, Smooth and Lift, will be the most versatile and we expect will represent the largest volume. The next product, Sculpt, used for the mid face volume represents the premium priced Filler segment. The Lip and Eye products address more specialized market segments.

Speaker 3

This is a complete portfolio positioned to be highly competitive in this growing market. Turning to our Extra Strength Evo program. During the quarter, We completed our Phase 2 clinical study. The interim data provided halfway through the study demonstrated 26 weeks or 6 months Duration across various parameters as we followed patients back to their baseline after being treated. We look forward to having the final data set presented in the Q4 of this year.

Speaker 3

We continue to receive positive feedback from customers who are interested The unique precision profile of Jeuveau with the option of a longer duration formulation. This In combination with our final Extra Strength data and the input from advisory boards will help guide us with respect to our next steps with this program. With that, I'll hand it back to you, David. Thanks, Ruiz.

Speaker 2

We remain very excited about the differentiation of the Evolise portfolio and its potential to become one of the leading fillers in the U. S. Our cash pay focused platform was designed for scale And there are tremendous synergies we can achieve by leveraging our seasoned sales force and our rapidly growing customer loyalty program to launch this innovative new technology alongside our Flagship, Chubot. We continue to believe the combination of a highly competitive filler line and our growing customer base Provide the unique opportunity to build a durable brand that adds tremendous value to Evolus and our shareholders. Now I'll turn it over to Sandra, who will cover the financials.

Speaker 4

Thank you, David. I would like to echo David's earlier comments and congratulate the Evolus team for another quarter of above market overall performance, including record highs in sales and our key metrics and for their continued focus on operating expense and cash management. Turning to the results. Global net revenues for the Q2 were $49,300,000 up 33% compared to net revenue in the Q2 of 2022, With U. S.

Speaker 4

Sales comprising more than 95% of the total. Once again, U. S. Sales this quarter were driven primarily by higher volumes. Pricing in the U.

Speaker 4

S. Remains strong overall and our average selling price in 2023 is running in line with the same period last year, while our customer reorder rate continues to track above 70%. Our reported gross margin for the 2nd quarter 68.7 percent and our adjusted gross margin, which excludes the amortization of intangibles, With 70.2 percent and in line with our guidance. Our GAAP operating expenses for the 2nd quarter Were $64,500,000 compared to $53,800,000 in the Q1. Non GAAP operating expenses for the 2nd quarter For $42,700,000 which included a $4,400,000 milestone payment related to our new U.

Speaker 4

S. Biller license. Excluding this, non GAAP operating expenses were $38,300,000 compared to 35,500,000 In the sequential quarter, this represents an 8% increase in non GAAP operating expenses, while revenue increased 18% compared to Q1. As a reminder, non GAAP operating expenses exclude product cost of sales. Reported selling, general and administrative expenses for the Q2 were $41,200,000 compared to 37,400,000 Recorded in the Q1, with the increase mainly attributable to higher commercial costs.

Speaker 4

This quarter, SG and A expenses included $4,000,000 of non cash stock based compensation compared to $3,300,000 in the 1st quarter. As I mentioned, this quarter we recorded a $4,400,000 expense related to the 1st milestone payment to Cimataz. As a reminder, our next milestone payment of €1,600,000 is not due until 2025, after the planned launch of our first filler product. Our non GAAP loss from operations in the second quarter was 8,000,000 compared to $5,900,000 reported in the Q1. Non GAAP loss from operations this quarter Includes the $4,400,000 license milestone expense.

Speaker 4

Net of license expenses, Non GAAP operating loss declined $2,300,000 as compared to Q1 $10,500,000 as compared to Q2 2022, Continuing our trend toward profitability and consistent with our initial 2023 guidance, we continue to expect to achieve Non GAAP operating profitability in the 4th quarter excluding our investments related to Evolise. Both non GAAP operating expenses and non GAAP loss from operations exclude stock based compensation expense, revaluation of the contingent royalty obligation and depreciation and amortization. To further elaborate on the investment related to the U. S. Filler, as previously announced, we will fully fund the filler launch cost, which takes the combined business to sustained profitability in 2025 by drawing on the available $50,000,000 tranche of debt from Pharmacon with $25,000,000 in Q2 $25,000,000 in Q4 of this year.

Speaker 4

Last quarter, we raised our 2023 operating expense guidance By $8,000,000 solely to account for the addition of filler launch costs, including the upfront $4,400,000 milestone payment. Net of this $8,000,000 in 2023 and an estimated $15,000,000 in interest expense, that leaves $27,000,000 available to be invested until the filler is profitable. This investment will be concentrated over the back half of twenty twenty four And the front half of 2025. Considering the high leverage we achieve on our existing infrastructure, launching the filler line is highly synergistic, Which gives us the confidence this additional $50,000,000 fully funds the launch. With sustained profitability on the toxin achieved this year, We're confident that we are fully funded to sustain profitability on the combined filler and tauffins businesses.

Speaker 4

Turning to the balance sheet. We ended the 2nd quarter with $41,700,000 in cash compared to $31,500,000 on March 31, 2023. The sequentially higher balance included the drawdown of $25,000,000 from our Pharmakon credit facility. In the Q2, net cash used for operating activities was $13,300,000 which included The $4,400,000 milestone payment. Net cash used in the Q2 of 2023 declined sequentially as compared to the Q1 of Representing our continued progress toward cash flow breakeven.

Speaker 4

Before I turn it back over to David, I would like to summarize our 2023 guidance. Based on our strong year to date performance and confidence in the resilient toxin market, We now expect total net revenues for the full year of $185,000,000 to $195,000,000 As a reminder, The Q3 is typically our seasonally lowest of the year. And adjusted gross margin in the range of 68% to 71% Unchanged from last quarter. Full year 2023 non GAAP operating expenses between $153,000,000 158,000,000 also unchanged from last quarter. Other modeling assumptions for 2023 include quarterly interest expense of $3,500,000 And full year weighted average shares outstanding of approximately 57,000,000.

Speaker 4

Looking beyond 2023, we Continue to target total revenue of $700,000,000 in 20.28 driven by continued growth and share gains in our neurotoxin Franchise in the U. S. And international markets along with the growing contribution from our Evolise line of fillers that begins in 2025. This equates to a compounded annual growth rate of 29% on a total addressable market that is 70% greater with the addition of a filler Product line, back to you, David.

Speaker 2

Thank you, Sandra. The results of the Q2 clearly demonstrate the continued above market progress the Eblis team is achieving in the execution of our long term growth strategy. With record quarterly revenue and all time highs in our key metrics, we continue to build momentum, outpacing both the underlying growth of our markets as well as the competition. As we mentioned, we believe that we gained another point in market share year to date, bringing us to 11% market share of the toxin market in just 2 years since the relaunch of Jeuveau. While we are very excited about the continued momentum in our toxin business, we know that adding the filler lines will expand our total addressable market by 70%, Driving us towards $700,000,000 of revenue by 2028, a 29% CAGR on the top line.

Speaker 2

Simply put, we have a clear path to exceptional growth. We are fully funded to achieve that growth and we have an experienced Team in place to execute our growth plan. With our business model focused on the cash pay market, we have built a moat from our competitors. This category is transitioning from pharma to beauty and our cash based focus enables us to partner with practices Through 1st in class programs like our co branded media, which helps accelerate practice growth and to do so more profitably. This is a unique and sustainable competitive advantage for Evolus, the benefits of which are evident in our pace of growth and strong financial results.

Speaker 2

We're excited to report Q2 results above our expectation and to raise our outlook for the balance of 2023. We look forward to keeping you apprised of our progress as the year unfolds. Now let me turn the call back to David briefly before we go

Speaker 1

Thank you, David. Before we go

Speaker 2

to Q and A, I

Speaker 1

want to mention that Evolus will be participating in 3 upcoming investor conferences. First is Canaccord Genuity's Growth Conference on August 9 in Boston, the H. C. Wainwright Global Investment Conference on September 12 in New York, And Cantor Global Healthcare Conference on September 26th also in New York. We invite interested investors to reach out to us

Operator

Thank you. At this time, we will be conducting a question and answer A confirmation tone will indicate your line is in the question from the queue. One moment please while we poll for questions. Our first question is from Mark Goodman with Leerink. Please proceed with your question.

Speaker 5

Thanks for taking the question. This is Rudy on the line for Mark. Congrats on the strong quarter. I just have a question regarding the market dynamics. I think you mentioned that you already reached over 10% market share.

Speaker 5

Can you provide more color on the market dynamics given that U. S. Toxin market Decline in single digits in the same quarter and how the trend looks like moving into the 3rd quarter? Thanks.

Speaker 2

Hi, Rudy. This is David. Thanks for the question on the market. Just stepping back, overall, the market Continues to be strong. We see whether it's conversations with our account base or the data we're seeing within our Research is that the toxin market continues to grow at a healthy clip.

Speaker 2

Now we recognize you're reconciling Different reports that are going to be published from the different manufacturers and you ultimately have to triangulate to what your growth assumptions are. But I think they all point to a market that Continues to be favorable through the front half of the year and also point to the fact that we're coming up on a back half of the year that will wrap around on a relatively depressed base. So We do expect the back half of the year to also be very strong, if not pick up a tick from what we've seen in the front half.

Speaker 3

Next question?

Operator

Our next question comes from Annabel Samimy with Stifel. Please proceed with your question.

Speaker 6

Hi. So my questions were kind of along the lines of that. I guess we used to use BOTOX is somewhat of a proxy for market growth given they're the largest player, and you certainly seem to be Bucking that trend. So I guess, clearly, you're grabbing market share. You're now at 11%.

Speaker 6

But can you give us a little bit Color of some of the market share that you're experiencing within the practices that you have Partnered with or are within your Evolux program and how that might look? I think the 11% that you're talking about is for the broader market. So maybe you can just give us a little color there. And then I have some follow ons. Thanks.

Speaker 2

Great. Annabel, thanks for the question on growth. Now look, in this market, it's always challenging within a quarter to tease out exactly what's taking place. I can tell you first anecdotally in conversations with large medical spas that are chains or individual practices, I consistently hear that practices are growing. Of course, they're not growing at the post pandemic rate that we So that was a significant boom, but we're back to growth rates that are in line with where they were prior to the pandemic.

Speaker 2

And that's pretty consistent that we're seeing geographically Across the country and as we stratify our customer base this quarter, the majority of our growth came from our existing customers. And we see that the larger customers as well as the smaller ones are continuing to grow at a healthy clip. When you step back, right, this is a $300 to $500 procedure for the It's very affordable. This is the gateway procedure in the category. And once consumers get into the space, they continue using the product.

Speaker 2

We demonstrated that in our consumer loyalty program as well where we're seeing redemptions of existing patients hitting an all time high. So All metrics continue to point very favorably in this market and we feel very confident in the strength of that continued growth.

Speaker 6

Okay. And any sense of the share within the practices itself themselves that you're partnered with?

Speaker 2

Yes. As you pointed out, clearly, we are gaining Market share in the toxin category with the growth that we had year to date, not just in this quarter. And as you saw last year, we continued to pick up share as well where Last year, we grew at a very healthy clip also with about 50% growth. So we continue to see a very favorable trend where Existing customers are willing to commit more of their business to Jeuveau as they gain confidence with our brand And they participate in the benefits of our advertising, which is a key driver, especially when they're looking for growth. That younger generation is the growth driver.

Speaker 2

Our advertising is targeted to that younger generation. And the more they invest with us, the more we invest back Into that advertising. And that benefit continues to build as you move up our Evolux tiers for our customers that purchase more. So we're seeing the benefits of both the field's confidence in selling the product and the customer engagement with the company. It's a very different go to market strategy that we've designed because we're cash day focused and the market is starting to take notice of that and we're seeing it reflected in the uptake.

Speaker 6

Okay, great. And I guess maybe switching tax a little bit on the Extra Strength. So, I know you want to consult with your The Advisory Board on next steps after the full data come out. Is there any direction that you're leaning in? I mean, we've done our own channel checks and Seems like the injector population isn't particularly hesitant to use or reconstitute the drug off label to get extra strength.

Speaker 6

So Any directions that you're leaning in at this

Speaker 3

point? Thanks, Annabel. You're absolutely right. That's exactly what we're seeing. With the presentation of the data, really the two things that people are pointing to is publish the data, put it into the public domain.

Speaker 3

And remember, these files are already commercially available. So they're basically saying just finish the data set, show it to us, Publish it and we'll take it from there. And then there's another group that basically says, you should consider doing head to head. But really No one's really pushing towards taking this to full registration.

Speaker 6

Okay, great. Thank you so much.

Operator

Our next question comes from Navin Tai with BNP. Please proceed with your question.

Speaker 7

Hi, thanks for taking my question. Can you let us know the specific drivers for the Q3 drove a stronger acceleration versus the growth we've seen in Q1? And also on market shares, BOTOX market share was steady in the quarter. So did Gevo take share from other players? And have you seen any trend of consumers switching to a value toxin like Trevo?

Speaker 7

Thank you.

Speaker 2

Yes. Nivon, thanks for the questions. Let me start with share. Since launch, the large majority of our share has been coming From BOTOX. And when you speak with customers, it's intuitive.

Speaker 2

We have the only other 900 kilodalton molecule On the market. We believe that scientifically that is the gold standard. And as accounts gain experience with our brands, they're learning about the unique precision profile, Which offers a unique advantage when you're injecting neurotoxin. So naturally, we continue to believe that as we gain share, not just in this quarter, but going forward, It will continue to come from the market leader. As it relates to how we think about the back half of the year, rather than comment on each quarter, I think It's fair to represent it as the back half of the year has some favorable dynamics to it.

Speaker 2

You're coming up on a depressed base From the back half of last year that we'll wrap around from. And you have a front half of the year where we've from our standpoint, We've exited with some significant tailwinds. We've obviously had very strong performance that accelerated from the first into the second quarter. And we think that that in combination with the continued strength of the market creates a lot of momentum for us in the back half of the year. On top of that, we continue to see very nice growth internationally.

Speaker 2

As you know, we've only been in the international markets in Europe For just 3 quarters now, so we're seeing very good uptake in the early days. And then as Rui pointed out, the Extra Strength data is a topic that gets reviewed At all major medical meetings and understanding that relationship between dose and longevity is an important one. And our Phase 2 final results are going to be an Important data set that confirms the relationship between dose and duration. And then lastly, what we didn't anticipate with the announcement of EVALYSE With the amount of excitement we're getting from customers that we hadn't engaged with before, that we're always asking what we would be adding to our portfolio next. This really is a novel technology.

Speaker 2

It's one that through the advisory board meetings we've had in the Q2 and in speaking with investigators, There's a tremendous amount of excitement around this product. And I think the combination of those things gives us a lot of confidence that the back half of the year is going to be a great back half for us.

Speaker 8

Thank you.

Speaker 7

And actually on the international launch, do you have any key learnings from your month long launch in Italy? I know it's In recent and also your other launches in Europe so far?

Speaker 2

Yes. The team is doing a really nice job in The key metrics executing against them clearly comes down to the product, which we understand the product very well from the U. S. We've taken those learnings, a number of those key opinion leaders and we've engaged key opinion leaders in Europe that we've Used as we've introduced the product in new markets like Germany and Austria and now most recently in Italy. And the more we invest in education, we do see Greater confidence and better uptake resulting from that.

Speaker 2

So we continue to replicate that model as we bring the product into new markets And we established a new company and a new brand in the space. So we're pleased with the uptake we're seeing in the markets that we've entered thus far.

Speaker 7

Thank you.

Operator

Our next question comes from Louise Chen with Cantor Fitzgerald. Please proceed with your question.

Speaker 9

Hi, congratulations on all the progress this quarter and thank you for taking my questions. So I think first of all, I wanted to ask you about was your facial filler line. It looks like you have Some opportunities where you might be first to market here, where I don't see any other additional competition. So for example, from the eyes perspective, I was just curious if maybe you could Lay that opportunity out, that seemed really unique. And any other of these opportunities that you mentioned here, where you might be first to market or where you have a real competitive advantage?

Speaker 9

And then secondly, on the $700,000,000 where are the potential upsides to that? And then also, if there's any way you can break out What you put in there, I know that you said 10% to 15% is international sales, but how do you think of all your other products that are grouped in there? Thank you very much.

Speaker 2

Great. Some great questions in there. Let me start with Evolise. As you know, we did significant diligence on Fillers around the globe before we reach an agreement with Simitase on Evolise. And we feel very confident that we have a differentiated technology both Scientifically and in the initial clinical data that we had seen from Europe that we'll share in the coming future.

Speaker 2

What we didn't expect As we've done these ad boards, it is how differentiated it is in the clinicians' hands in the trials. What we're learning is the product does Play out. The science plays out clinically in these attributes. And we do expect this to be a first in class technology. No other hyaluronic acid is manufactured Through this cold technology and it does yield a different type of product that the market hasn't seen and this product is not available anywhere else around the globe today.

Speaker 2

And that is unique because generally in this market, there are products that have been available for many years in Europe and those products migrate then into the U. S. Through clinical trials. So We have a unique opportunity here to introduce a 1st in class technology and introduce it into a market In the U. S, which is the largest market around the globe, which hasn't been done before where it enters this market before it enters other.

Speaker 2

So we're very excited about that.

Speaker 3

Yes. And just to add, there is another product that's approved in that teardrop area right now. But just to build on David's side, it's Interesting. If you go to a conference and listen to clinicians speak to this area, it's still an unmet Kind of place where they have a good solution. You can get good results at the beginning, but typically these gels tend to swell and create complications.

Speaker 3

The eye product here was built with the end goal in mind. And what they did was they created a balance where Which is where a lot of folks get into trouble with the current gels. So it's a difficult area to treat, which is why I said it was a specialized market. And we're pretty excited about Because again, it was purpose built for an indication to match a tissue interface. So in that sense, we're we think we have quite a unique product.

Speaker 4

Hi, Louise. This is Sandra. Let me take your question as it relates to our $700,000,000 long range guidance. So the $700,000,000 as David said in his script, We expect roughly 10% to 15% of that revenue to come from international. As you know, our international market is strictly the Nuceva product, the toxin only.

Speaker 4

So Call it $75,000,000 to $100,000,000 of that number is going to come from Nuceva outside of the U. S. And I think we've elaborated on our sort of launch plan associated with that product and are very comfortable that we're well on track to make that number. The remaining $600,000,000 comes from the U. S.

Speaker 4

And Just to give you a sense of, as we've mentioned, our market size increased by 70% by adding a filler product to the portfolio. So we're going to be looking at a $7,000,000,000 U. S. Addressable market, give or take. We're expecting that both markets grow Healthily over the next 5 years, in the high single digit numbers on a $600,000,000 revenue number, right?

Speaker 4

So That equates to toxin at about $400,000,000 and filler contributing in another $200,000,000 reflected when we raised our Long range guidance with the announcement of the filler deal, there was a 200 incremental raise for that guidance. That $400,000,000 on the top end It's a very modest share gain compared to the share we have now. So we see ourselves as being very well to achieve or beat that number on the back of those healthy market growth rates, knowing that we could see Even further opportunity coming from the tailwinds that we even see in the back half of this year associated with extra strength and some of the traction we're getting in the market. As far as EVILISSE is concerned, we've learned a lot from launching a toxin in the U. S.

Speaker 4

And we've been very thoughtful about the launch Cadence of the products as well as the revenue ramp associated with those products to get to our projections in 20 28 And I've taken a conservative view as we typically do when we look that far out on how we expect those product adoptions to occur over the course of the launch 2025 to 2028.

Speaker 7

Thank you.

Operator

Our next question comes from Doug Cai with H. C. Wainwright. Please proceed with your question.

Speaker 10

Hi, good afternoon. Thanks for taking the questions. I guess, David, it sounds like You feel like you're taking market share across your account base. But I'm curious, are there any Segments where you feel like you're doing particularly well and over indexing and I mean that by other customers or maybe from patient demographics, I mean, Obviously, millennials have been a key target for you for some time. So just any color as to where you might be sort of really driving some competitive

Speaker 2

Yes. It's a good question, Doug. You're right. From a consumer standpoint, we continue to Penetrate deeper and faster within this younger demographic. Our new to toxin patients in our consumer loyalty program Are primarily millennial or younger.

Speaker 2

And I think that bodes very well to where the practices are headed. It also aligns with our Investment in advertising that we've been placing and that continues to be a key driver of how our brand is differentiated in the consumers' mind. This is very much A Younger Generation's brand and its position as such in all of our advertising. What's also interesting though when you look at our business Across the U. S, it's very diverse.

Speaker 2

Now we're in 11,000 clinics. So we don't heavily over index in any one area of course. And we continue to see broad based adoption of this brand. Now despite all that, where we under indexed Penetration in the market. We're only in about a third of the category now with this product and we have 2 thirds of the market that is currently not using our brand, Jeuveau.

Speaker 2

So We see a lot of runway for the brand to continue to go wider. And you saw that this last quarter, we hit an all time Since our initial launch phase of new accounts added, there wasn't a specific incentive in the field that drove that. It was Driven primarily by overall interest in what we're doing in the market and how we're doing business differently. And we believe that that speaks To the differentiation of our business model, the practices are looking for ways to grow and they're looking at other ways of partnering with companies and Our cash pay proposition has opened up a number of opportunities to do business differently with us. And we believe that that's a continued trend that won't flow.

Speaker 10

And David, just one follow-up. In terms of the 2 thirds of the market where you're not currently doing business, but given your Count growth this quarter seems like you're maybe starting to make some progress. Is there anything that has limited you for those customers in the past? And is there anything that you can do to improve penetration? Or is it something that you think will just occur over time?

Speaker 10

Thank you.

Speaker 2

Yes. It's a number of things. The product is now in its 4th year in the market. And under the R and D team was really the data we've generated since approval has been significant. And the noise from the podium on that data between the And the noise from the podium on that data between the millennial study published the millennial data we published, the male data we published as As well as out of this 40 unit dose, there is quite a bit of new data emerging on Jeuveau.

Speaker 2

That's number 1. The second is Key opinion leaders are becoming more and more engaged with our brand. They're understanding the unique profile of the precision of Jeuveau and that's being referenced From the podium, at the most recent medical meeting this summer, we were the most mentioned brand on stage as we sat in that room and listened To the presenters speaking about the product, that hadn't happened to date. So I do believe the momentum is shifting at the medical meetings from the podium as well. So a combination Both is a key driver.

Speaker 2

And then lastly, the recent announcement of Evolus has resulted in even further engagement with Evolus From those key opinion leaders that one are some of them are currently in those trials, others are aware of the fact that this really is a new generation of technology and They want to be a part of the future of where we're taking the company. And I do believe that all of these are factors that are catalysts that continue to build on the execution that we've demonstrated over the We've demonstrated over the last couple of years.

Speaker 10

Great. Thank you and congrats on the progress.

Speaker 2

Thank you.

Operator

Our next question comes from Serge Belanger with Needham and Company. Please proceed with your question.

Speaker 11

Hi, good afternoon and thanks for taking my questions. First one is on the pricing of Jeuveau. Just curious if there's been any pricing changes on the product during the first half of the year and maybe where those Pricing to stand relative to your competitor products?

Speaker 2

Sure. Well, pricings continue to be very stable in this market. It certainly hasn't evolved significantly And we continue to benefit from a very favorable market from that standpoint. I don't think you're seeing any pricing wars amongst the manufacturers. On the flip side though, you're not seeing price increases yet either in the market at least year to date.

Speaker 2

But it's a favorable environment and we're not seeing much evolving there.

Speaker 11

Okay. And then going back to the European the ongoing European launch. Obviously, you've been Successful in the U. S. At outperforming the overall market trends.

Speaker 11

How do you look at doing that in Europe? And do You think the same opportunity exists to repeat what you've done in the U. S?

Speaker 2

Yes. We really do. Having spent Some time now in Europe, in the markets as we've launched, there's a tremendous amount of interest in Trialing a new neurotoxin. And I would say, look to be realistic, we're only 3 quarters into the first market, which is the U. K.

Speaker 2

And That trial stage is an important stage for any new neurotoxin entering and the experience they're getting with the product has been The same experience that they're getting in the United States, which is very favorable. And we expect that as in Germany and as well as Italy. Now of course, Building a business like we have in the U. S, it takes a little bit of time. And so it takes the right talent, the right focus and continuing to do that over time and you Start to see meaningful value that gets created from it.

Speaker 2

So I think we're on the right track in Europe, albeit 3 quarters into our first market, 2 quarters into our 2nd market and less than a quarter into our 3rd. So it's still early days, but we feel very good about the team and what they're accomplishing.

Speaker 11

Thanks.

Operator

Our next question comes from Balaji Prasad with Barclays. Please proceed with your question.

Speaker 8

Hi, this is Mikaela on

Speaker 12

for Balaji. Thanks for taking our questions. Just following up on the filler line, how would Compare Evelisse to that of competition like RHA fillers and thinking looking ahead, how are you thinking about how this The line will stay into your portfolio once you reach commercial stage. Thanks so much.

Speaker 2

Let me have Ruvi comment on the product side differences. I think As it relates to the filler overall, as you know, we just announced the deal within the quarter in the second quarter. We're in the process now of Rui and his team taking over all of the clinical development and the exchange with the FDA and we're really pleased with the progress that team has made and We feel very confident in our ability to deliver on an approval in 2025. Secondly, We're in the early stages of preparing our plants, right, with the launch expected in 2025. We still have a lot of work to do of establishing the scientific story, The data itself and capturing that working with the investigators on how to present that data, there's quite a bit of work that we have to do in order to develop it.

Speaker 2

But importantly, we do have the infrastructure and the infrastructure is what we will be leveraging, the sales force, the digital footprint and the consumer loyalty program. So You can look forward to us apprising you of further commercial details of how we bring this brand to market as we enter next year and closer to commercialization. But I'll let Rui talk a little bit about how the market thinks about differences in the products.

Speaker 3

Sure. In terms of when you ask about how does it compare to RHA, the appropriate answer is You shouldn't compare it unless you have data to compare it. So we haven't compared our product to RHA. We have, however, compared our product to one of the market leaders, which is Restylane. And though the 2 market leaders are represented by JUVEDERM and RESLUN.

Speaker 3

So in Europe right now, we have some preliminary data that's going to be used for Submissions in Europe and what we find is it compares really well. In head to head studies for instance in the NLF, we're seeing Statistical superiority at 3 6 months. And then there is a lip study that's also showing that it's almost twice as long go back to baseline. That's the early European experience. And then the U.

Speaker 3

S. Trials are large trials as I outlined with active controls Against one of the leaders right now, I'll rest on.

Speaker 13

Thanks so much.

Operator

We have reached the end of the question and answer session. I'd now like to turn the call back over to management for closing remarks.

Speaker 1

Thank you, operator. If you missed any portion of this call, a replay will be posted to our website later today. Thanks to everyone for joining us. We appreciate your interest in Evolus and we'll be available if you have additional questions.

Operator

This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.

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Key Takeaways

  • In Q2, net revenues grew 33% YoY to $49.3 M, leading Evolus to raise its 2023 sales guidance to $185 M–$195 M and stay on track for its $700 M 2028 revenue target.
  • Jeuveau added ~800 new accounts (total ~11 000) and 64 K new Evolus Rewards members (total 638 K), while loyalty-program treatments hit a record 147 K this quarter and 1 M since launch, helping capture an estimated 11% US neurotoxin market share.
  • Internationally, Nuceba is now commercial in five key markets—including the recent launch in Italy—with Europe set to generate high single-digit million dollars in 2023 and 10–15% of Evolus’s 2028 revenues.
  • Evolus’s Avalyse filler portfolio of five next-generation hyaluronic acid products made via proprietary “cool” technology is on track for an FDA filing of its first two fillers in ~12 months and approvals in 2025.
  • Disciplined expense management drove operating leverage in Q2, with non-GAAP operating loss narrowing to $8.0 M (including a $4.4 M milestone), and Evolus expects toxin profitability in Q4 2023 and combined toxin/filler profitability in 2025, fully funded by a $50 M debt facility.
AI Generated. May Contain Errors.
Earnings Conference Call
Evolus Q2 2023
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